Credit where it’s due… Credit Suisse pulled off a rocky rebound yesterday, but it’s not out of the woods just yet. On Friday the Swiss bank’s credit risk hit a record high after liquidity rumors spread, spooking investors. CEO Ulrich Koerner later told investors the bank has a $100B capital buffer, but the reassurance backfired:
- Shaky shares: C-Suisse’s stock plunged as much as 12% yesterday morning to a record low, before mostly rebounding. But the bank’s stock is still down 60% this year, and it’s struggling to regain investors’ confidence.
- It’s no “Lehman moment”: Analysts say C-Suisse is unlikely to default on investors, much less pose a systemic risk to wider markets. But the bank faces an uphill battle to claw back this year’s steep losses.
Risky business… Credit Suisse has a well-earned reputation for taking big risks: the bank lost over $7B on investments in hedge fund Archegos and lender Greensill, both of which collapsed last year. Cue: C-Suisse posted a huge loss again last quarter (while rival investment banks UBS, Morgan Stanley, and Goldman Sachs posted profits). Now investors are anxiously waiting for Credit Suisse to announce a restructuring plan.
Confidence is a valuable asset… and Credit Suisse may have overdrafted from its investors. When the beleaguered bank announces its turnaround plan — expected this month — analysts say it may need to raise up to $4B to finance its restructuring. But given the floundering finance giant’s recent track record, investors may be reluctant to fork over more cash.